Saturday, September 5, 2015

Random thought: weekend prospecting

This is random series. 

I was just doing my leisure read. I was reading up on Warren purchase of Philip66. I was intrigued to see Warren buying a company from the Oil sector. It is not hard to see why.

Philip is a Mid stream and downstream player. So if there is over production from
Shale and crude, it still need to be transported and refined. Also, they get fees for transporting the oil through pipes. They have recurring incomE


When I read their transcript for their quarter presentation, I am quite blown away by the quality of questions. Specific, and obvious that homework was done. There were expansion plans and growth drivers were clear. It is what actually Warren books say he would buy. 

So, I remembered Rotary Engineering as a builder or storage tanks for oil and they have put behind the overrun project. If the world is flooded with oil, then they need a place to store it. Rotary engineering has a lot of things going for it, but strangely, it's order book is drying up. 

It's has neligible debts. And it moving up the value chain but building more sophiscated storage solution and has made inroads in new market such as Thailand and LNG storage. They mentioned they Are leading a constortium in bidding for a port project. 

They are also using their cash to put an  10% stake in a indonesia Terminal storage company for recurring income. 

Yet, they have not won any significant big projects and their earnings will continue to fall. In fact, their current order book of 161 mio will most probably just last them
At most another year from now. 

Chairman has been buying the company since the price is at 50 cents and is continuing to buy at 30 cents. But the CFO left... Mixed signals here.

It has fallen from a sexy turnaround story with buy targets of above 80 cents to a sorry 30 plus cents company... 

Catalyst would be a big project win.

It reminded me that for every crisis, there is opportunity. We just need to know where to look. 

Remember everyone was talking about rising interest rate being good for the banks? 

Of course the amount of loans will still depends of the state of economy. 

But the banks are the recent "unlikely" causality. 

My radar is expanding to prepare for further weakness in market...



1 comment:

  1. Hi SI,

    I think it is not only the recurring income for P66, Warren is probably still confident in Oil for the LR. Me too!

    Actually CAO is having facilities for storage, which I thought was a good buy last year. Make some quick bucks and exited before the fall. Will put into watchlist again.

    Rotary is quite capital heavy, and that is only thing I know.

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